Credit: Shutterstock photoRoper Industries Inc. ( ROP ) reported second-quarter 2013 non-GAAP earnings of $1.31 per share, up 13.9% from the year-ago quarter and beat the Zacks Consensus Estimate by a penny.
Quarter Details
Roper's non-GAAP total revenue (excluding a fair value adjustment to acquired deferred revenues and adjustments related to the MHA acquisition) increased 11.0% year over year to $804.9 million in the quarter. Revenues missed the Zacks Consensus Estimate of $812.0 million.
On a GAAP basis, Roper reported revenues of $784.0 million, up 8.2% from the year-ago quarter. Acquisitions and divestitures accounted for 11.0% of the revenue growth in the quarter. Organic revenues increased 1.0% and the company reported a backlog of $1.03 billion.
Growth across most of its business segments also contributed to the year-over-year increase in revenues. Revenues from Medical & Scientific Imaging and RF Technology increased 37.8% and 3.7%, respectively. The strength in these segments more than offset the 3.1% decline in revenues from Industrial Technology. Energy Systems & Controls segment reported a modest 0.4% growth on a year-over-year basis.
Adjusted gross profit increased 17.3% year over year to $466.5 million. Gross margin in the reported quarter increased to 58.0% from 54.9% in the year-ago quarter, primarily driven by better mix and higher revenues.
Adjusted income from operations increased 17.3% year over year to $209.8 million. The upside in operating income was based on improved sales. Operating margin improved from 24.7% to 26.1% on a year-over-year basis. Adjusted net earnings increased 14.0% from the year-ago quarter to $130.9 million.
Roper exited the quarter with $374.6 million in cash and cash equivalents and total debt of $2.76 billion (including the current portion) compared with $430.0 million in cash and cash equivalents and total debt of $1.92 billion (including the current portion) in the previous quarter. Roper reported free cash flow of $129.1 million at the end of the second quarter.
Guidance
Roper revised its fiscal 2013 earnings outlook from $5.76-$5.94 per share to $5.72-$5.86 per share. The company also projected that its sales will increase in the range of 12%-14%, including organic growth of 6% to 8%, for the rest of 2013. Roper expects operating cash flow to exceed $800 million in fiscal 2013.
Recommendation
We believe that strong backlog coupled with robust organic growth will drive earnings growth. Moreover, accretive acquisitions will expand its product portfolio, providing a significant competitive edge over its peers.
However, macroeconomic concerns, integration issues due to acquisitions and competition from Danaher Corp . ( DHR ), Dover Corp ( DOV ) and Ingersoll-Rand Plc ( IR ) are possible headwinds for the company.
Currently, Roper has a Zacks Rank #3 (Hold).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
